Idemitsu, partners approve $9bn Vietnam refinery

The joint venture partners on Tuesday signed a preliminary agreement with an international consortium to build the $9 billion Nghi Son refinery after securing part of around $5 billion in bank loans and agreeing to final terms with the Vietnamese government, an Idemitsu official said.

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By MARI IWATA

TOKYO -- Japanese refiner Idemitsu Kosan Co. and its
partners have formally decided to build Vietnam's long-delayed
second oil refinery, which would help meet the country's
growing demand for oil products and come amid a refining boom in the region.

The joint venture partners on Tuesday signed a preliminary
agreement with an international consortium to build the $9
billion Nghi Son refinery after securing part of
around $5 billion in bank loans and agreeing to final terms
with the Vietnamese government, Idemitsu Chief Financial
Officer Kenichi Matsui told reporters Tuesday.

The 200,000-bpd Nghi Son refinery, to be built 180 kilometers
south of Hanoi, will process Kuwaiti crude supplied exclusively
by Kuwait Petroleum International.

Construction is expected to start in
the second quarter of this year and commercial operations are
expected to begin in the second quarter of 2017, Mr. Matsui
said.

Idemitsu and Kuwait Petroleum each hold a 35.1% stake in the
project. State-owned Vietnam Oil and
Gas Group, or PetroVietnam, and Mitsui Chemicals own 25.1% and
4.7%, respectively.

The project has been delayed several
times -- the final investment decision was originally scheduled
for the summer of 2010 -- as the partners struggled to obtain
bank financing without underwriting by the Vietnamese
government. Talks progressed rapidly, however, after the
government agreed in August to underwrite some of the project.

PetroVietnam will take all products from the Nghi Son joint
venture at Asian market prices, Mr. Matsui said. The refinery's
output is intended to meet the needs of Vietnam's domestic
market, but PetroVietnam has the right to export any excess
products to avoid low operating rates, he said.

Vietnam's oil demand currently totals around 350,000 bpd and
is expected to grow around 8% annually in the coming years,
Idemitsu said in a statement.

Nguyen Tien Dung, PetroVietnam's vice CEO, said Tuesday that
the Nghi Son refinery would help ensure Vietnam's energy
security. "When operational, the Nghi Son refinery and Dung
Quat refinery will meet over 70% of the country's demand for
oil products," he said.